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Tokyo - Japan’s Sumitomo Corporation has won phase one of the ¥9-billion ($220 million) contract to upgrade air traffic control systems for the Philippines along with the construction of the Air Traffic Control Center at the NAIA Complex.

Sumitomo Corporation has formed a consortium with Thales Australia Ltd. , the Australian subsidiary of leading French electric company Thales SA, to deliver $100 millions worth of next-generation air traffic control systems for the Philippines' Department of Transportation and Communication (DOTC)'s Communications, Navigation, Surveillance/Air Traffic Management System (CNS/ATM) project.

The company won from among three other bidders that were invited by DOTC for the supply/installation of new communications/navigation and air traffic management systems .

The invited bidders were Kanematsu Corp. and Selex Sistemi Integrati of Italy; Marubeni Corp. and Indra Sistemas, a Japanese-Spanish joint venture; Sojitz Corp. and Raytheon, also of Japan; and Sumitomo Corp. and Thales Systems, another Japanese joint venture, this time with a French group.

The introduction of the next-generation air traffic control systems has been divided into two packages and to be implemented in a phased manner.

Package one costs $100 million that covers for the supply and installation of air traffic management automation system and ATM automation center; communications; navigation signal monitoring system and meteorological system.

Components in Package 1 are Construction of a new air traffic control center building within the Ninoy Aquino International Airport in the Philippines, and delivery of air traffic control systems (including systems for communications, aeronautical information processing, satellite signal monitoring, and weather) at the new air traffic control center and major airports in the Philippines (about 25 sites).

The project is set for completion within 30 months, or by May 2013. Sumitomo Corporation said it will aim to also win the contract for Package 2.

The second part that will cost $120 million is for the supply and installation of automatic dependant surveillance-broadcast (ADS-B) ground station; en-route radar mode; terminal radar; VHF terminal and remote control air-ground communication facility; microwave link and very small aperture terminal or VSAT.

Components in Package 2 includesInstallation of radars at major airports in the Philippines (about 10 sites), and delivery of communications equipment to connect the air traffic control center introduced in Package 1 with major local airports.

The International Civil Aviation Organization (ICAO) has recommended a shift from traditional air traffic control systems, dependant on voice and radars, to a new system mainly based on digital data that uses geolocation satellites including GPS satellites.

In the meantime, the Philippines has been faced with the issue of aging air traffic control systems despite being in an extremely important position connecting Japan, China and South Korea with the ASEAN nations.

In the late 1990s, the Philippine Government decided to introduce a next-generation air traffic control system. The Japanese Government also considered this an ODA issue.

In 2002, the Japan International Cooperation Agency (JICA) concluded a contract to provide yen loans amounting to approximately 22.0 billion yen to the DOTC.

The completion of a safe and advanced air traffic control system with the support of the Japanese Government, preparing for the forecast increase in demand for air travel, will have great significance in terms of safety and efficiency not only for the Philippines, but also for nations around the world, including Japan.

Thales is the world's number one distributor of air traffic control systems. In fact, about half the airplanes flying worldwide are controlled by Thales' air traffic control system. With this project, Sumitomo Corporation will actively enter the field of air traffic control systems development, partnering Thales and contributing to airline safety and efficiency across Asia.

MANILA, Philippines—Despite opposition by civil-society groups, the Department of Transportation and Communications is keen on building a new international airport on Panglao Island instead of any other location in Bohol as based on requirements of navigational safety.

Rolando G. Tungpalan, deputy director general of the National Economic and Development Authority, said in an interview that the DOTC was reviewing the feasibility studies on the proposed airport—something that critics and even NEDA itself have asked to be done.

“The review is ongoing, but as of today [the DOTC] believes Panglao is the best possible location for the airport,” Tungpalan said. “It has something to do with the terrain and wind patterns.”

Even then, Tungpalan—who is responsible for investment programming—said there was no final and definite decision on the location yet.

In 2009, the NEDA’s investment coordination committee-Cabinet committee gave the green light to the proposed increase in the cost of the Panglao Island airport development project.

Changes in the design, increased prices of needed supplies and the acquisition of an additional 14.5 hectares of land pushed up the project cost to P7.54 billion, or 76 percent more than the original P4.27 billion.

According to the Neda ICC-CC, the project was approved on condition that the provincial government of Bohol was to conduct another multisectoral consultation to address ecological or environmental issues.

Earlier, a group of academics, lawyers and religious Bohol natives based in Metro Manila renewed its call for the government to “not rush” the planned international airport on Panglao Island as the state prepared to bid out a contract as part of a package of partnerships with the private sector.

In a letter to Transportation and Communications Secretary Jose P. de Jesus, University of the Philippines economics professor Ernesto M. Pernia said public consultations were not properly carried out and the feasibility study on the geologically unsound plan was done poorly.

Pernia, who represents the group called Concerned Boholano Professionals in Metro Manila, said there was a risk that the runway and buildings would collapse due to the sinkholes and caves, which government engineers failed to consider when they conducted a feasibility study because tests using ground-penetrating radar were apparently not done.

“We have reviewed the feasibility study done by the TCGI Engineers, the consulting firm hired for the purpose and we found the study’s quality and rigor markedly below par,” he said. “For instance, the economic forecasts are overly optimistic based on questionable assumptions.”

MANILA, Philippines - Was the Philippine Airlines (PAL) being biased when it enforced the retirement age of 45 for its female flight attendants hired over the last decade?

Or was it just being consumer-friendly, thinking passengers might not find so appealing women in their 60s -- the prime retirement age -- serving them on board.

Labor Secretary Rosalinda Baldoz thought the former.

On Thursday, she gave members of the Flight Attendants’ and Stewardesses’ Association of the Philippines (FASAP) the best gift this Christmas by pegging their compulsory retirement age at 60, for women and men alike.

Baldoz said the different retirement ages for PAL's cabin crew, who are performing the same services, "constitute a clear discrimination of their right to equal work opportunity."

The public was quick to comment on the issue, airing out what they felt about it on social networking sites.

The tone of Twitter and Facebook posts in reaction to FASAP's sweeping win over the PAL management ranged from congratulatory, humorous to plain sarcastic.

Some users welcomed the news and said they were happy for FASAP members. Others were curious about how PAL would fare against closest rival Cebu Pacific in giving passengers the best value for their money, especially since the latter's "dancing flight attendants" were a big hit.

Here is a sampling of what they have to say about this:

"Given that DOLE's ruling sets a precedent, I demand to see 60-year-old dancing flight attendants on Cebu Pacific as well." -- Dax Lucas on Facebook

MANILA, Philippines—“Mr. Fernandes has to fly to another meeting in Jakarta this afternoon, so we will wrap up in two minutes,” the organizer tells reporters during last week’s press conference to unveil the joint venture deal of Air Asia in the Philippines. “Any final questions?”

The owner of the giant budget carrier politely countermands him with a casual wave of his hand: “No, it’s ok. [We’re using] our own plane anyway. It can wait.”

Local reporters—most of them seriously covering the short visit of the international celebrity to the country—erupt in a wave of laughter.

Indeed, Tony Fernandes’ mien is often compared to that other rock star of the airline industry, Sir Richard Branson.

They are both perceived as brash and aggressive, and rarely take no for an answer once they’ve set their sights on something in the field of business.

Thus, when word got around that Air Asia would start a Philippine-based airline in a joint venture deal with local partners, not a few eyebrows were raised.

After all, isn’t the global airline industry—both legacy carriers and their so-called low-cost carrier cousins—struggling due to weak demand for travel by passengers hard hit by the recent economic crisis?

And with several carriers like Philippine Airlines and Cebu Pacific already fighting tooth and nail for the relatively small number (as compared with peers around the Asean) of flyers, isn’t the Philippine market too small for a regional giant like Air Asia?

To illustrate his point, he explains that he had to take one of Air Asia’s Airbus A320s out of circulation just to fly eight passengers from Kuala Lumpur to Manila at the time of his preference—a difficult decision for the cost-conscious former accountant.

For other major cities, no such private flight would have been necessary as would-be passengers could have easily booked themselves on multiple flights available throughout any given day.

“There is a massive amount of connectivity that is required in the Philippines,” he says. “If you look at Malaysia, Thailand and Indonesia, the growth [of airline passenger traffic] has really come out of low-cost carriers.”

Under the announced plan, Air Asia will start operating out of either the Diosdado Macapagal International Airport in Clark Field, Pampanga, or the Subic Bay International Airport in Olongapo, Zambales, by August 2011, with the first flight possibly coming in September.

The administrations of both special economic zones are presently lobbying aggressively to woo the new joint venture airline to make them its hub, although Clark supposedly has a slight advantage since the parent Air Asia airline already operates regular flights to and from the former US airbase.

Malaysia’s Air Asia Berhad will own 40 percent of the local joint venture, while the trio of Antonio “Tony Boy” Cojuangco, Michael “Mikee” Romero and Maan Hontiveros will own 60 percent.

Seen through local eyes, the airline’s owners are an unusual mix, but probably par for the course for the brash and aggressive Malaysian entrepreneur.

“I’ve known Tony Boy for a long time now and I’ve known Maan for many years through the music industry,” says Fernandes, whose past career includes working for a major recording company.

Most surprisingly, however, Fernandes’ decision to partner with Mikee Romero of Manila North Harbor fame is a vote of confidence for the young businessman who has been gradually stepping out of the shadow of his father, Reghis II.

“I met Mikee through basketball (Air Asia is a major sponsor of the Asean Basketball League where the team run by Romero is the defending champion), and I like his style,” Fernandes says. “He is young and aggressive. Sometimes too aggressive. If it were up to him, we would have had our [initial public offering] yesterday.”

But given that Philippine Airlines already serves the needs of more affluent travelers while Cebu Pacific is marketed toward budget flyers, what’s in it for the Filipino consumer?

The principal owners of what will be called “Air Asia Philippines” predict nothing less than what was previously thought impossible: Cheaper airfares—much cheaper than where they stand now.

“If you go to Air Asia’s terminal in Kuala Lumpur, you’ll see passengers in slippers,” says the joint venture’s chairman, Cojuangco. “This airline has been taking away business from the bus companies. That’s how cheap the airfares are.”

Company president Hontiveros also stresses that Air Asia Philippines’ operations will be patterned after its Malaysian parent: a flat organization that will keep costs to a bare minimum—with many of its ancillary services outsourced—in a move that will translate to cheaper airfare for end-users.

Amid the promises of cheaper fares, however, Fernandes believes that the best thing about having Air Asia come to the Philippines is its potential to generate more jobs for the local tourism industry.

“We can create 8,000 jobs in the Philippines, and that means 8,000 less who have to go abroad to work,” he says. “And all those jobs will also translate to more jobs in the tourism and service industries.”

Indeed, Fernandes, who professes a love for Filipino hospitality (warmer than anywhere else in the world, he says), already speaks like his interests are tied closely with those of the country’s.

“One of the key aims we have is to create more economic activity and more jobs for more Filipinos,” he says. “There’s so much talent in this country, it’s unbelievable.”

This early, it’s already starting to sound like a good partnership in the making.

FRUSTRATED by the constant pressure to evict him from his office despite a fixed four-year term, Alfonso G. Cusi tendered his irrevocable resignation as the director general of the Civil Aviation Authority of the Philippines (Caap) effective end of December to President Aquino.

“In spite of my four-year legal term, I submit my resignation for the sake of the Caap organization, the aviation industry and, ultimately, the country,” said Cusi in his letter. “This will give Your Excellency a free hand to choose a new director general who will continue to carry out the needed reforms in the Philippine civil-aviation industry and to whom the administration can give its full trust and confidence.”

“It has been an honor to work in government, and I will always be thankful for having been given a chance to serve the country,” said Cusi.

In Malacañang, Spokesman Edwin Lacierda issued a statement, naming Cusi’s replacement as acting OIC Ramon Gutierrez. “We welcome the resignation of Al Cusi. Now we can move faster in getting our country out of Category 2.” Gutierrez is a retired Air Force colonel and a former commercial pilot.

Cusi, since assuming the post on March 8, 2010, is leaving behind substantial progress in the government’s effort for the aviation industry to regain Category 1 status from the United States’ Federal Aviation Authority (FAA).

In 2007 the FAA downgraded the country to Category 2 status after the discovery of 89 “significant safety concerns” (SSC). Cusi had complied with the 87 SSC since taking over the post.

The last two items—organization and computerization—were within reach when the International Civil Aviation Organization (Icao) postponed its validation visit last month upon learning the Transportation and Communications department had appointed seven key officials, three of whom are outsiders, without Cusi’s knowledge.

Of the three outsiders, one voluntarily resigned, saying he is not fit for the office, while one of the remaining two had reportedly been booted out from an airline company where he used to be an executive.

President Aquino told reporters at Sofitel Hotel, where he attended the Christmas party of the Bulong Pulungan, that his choice for the next Caap director general “is qualified. He’s part of the Air Force; he’s part of the industry also. He is in private capacity already. I think he is very capable to advance the agenda as far as the air travel in the country is concerned.”

He added he wants to fast-track the resolution of the Caap problems.

But spooked by these developments, the Icao said it was postponing the visit, which would have removed Philippine Airlines and Cebu Pacific from the blacklist by the European Union, worried they would be dealing with a new set of officials.

This setback was also noted in the Icao Audit advice on their findings on the SSC and the EU blacklisting of all carriers registered in the Philippines.

Cusi has steered the Caap toward the right direction to regain Category 1 rating with no less than the president of Icao and the recent EU visit declaring that with Cusi’s leadership, the country is on the “right direction” and “it is only a matter of time” before we regain Category 1.

As director general, Cusi dedicated his efforts in transforming the Caap from a government line agency to a government-owned corporation as mandated by Republic Act 9497, otherwise known as the Civil Aviation Act of the Philippines.

A management expert, he was top honcho of the Philippine Ports Authority (PPA) for three years before he was appointed general manager of the Manila International Airport Authority (Miaa). During his six years stint at the Naia, he steered the premier airport to a point where the three passenger terminals were awarded ISO 9000, a world ranking that testifies to their conforming to international standards.

Cusi said he is keen in professionalizing the Caap, which, up to his resignation, was already training scores of people in aviation high technology, pilots, cabin crew and other highly sensitive positions. Most of the trainees were former Philippine Airlines pilots, cabin crew and experts in several fields.

Under the guidance of foreign experts from the Icao, the pilots and crew members are scheduled to undergo training at the Civil Aviation Training Center in Bicutan near Merville Subdivision.

Am I the only one having issues and losing a lot of money trying to book tickets online--an not finding major airlines and regional airlines helpful these day?-- I look at one regional airport in Southeast.

Am I the only one having issues and losing a lot of money trying to book tickets online--an not finding major airlines and regional airlines helpful these day?

SECURITY ISSUES, DOUBLE BOOKINGS AND CEBU PACIFIC AIRLINES

Cebu Pacific's online booking system is often operating internationally illegally and unsafe--as well as passenger-unfriendly.

"MOST OBVIOUSLY by ALLOWING DOUBLE BOOKING OF PASSENGERS WITH SAME NAME AND AGES--WITHOUT ANY initial online SECURITY CHECK is only one KEY EXAMPLE of INCOMPETENT SECURITY IN SOUTHEAST ASIA. Any disguised individual could occupy the second sets of seats."--KAS

For example, this past Friday, I was "permitted" on-line with CEBU PACIFIC in a crisis this past Friday to "accidentally book myself and [pay for] two family members" 2 times on the same flight--using all the same names and credit card address.

NOTE: This occurred because the local airline I was in (in Taiwan), UNI Air, is also incompetent and failed to tell me that 3 planes were canceled on December 10--due to weather issues--from tiny Beigan Island to Taipei. This thus made it impossible at the last minute to make my December 11 (1:20am) flight to Taiwan.

Next, when a few minutes later, I understood my error with CEBU's illegally operating system (1. the online system, 2. its fax-address and 3. phone numbers in Taipei for Cebu Pacific) failed to respond to my request to not double book myself and two families--and NOT TO CHARGE MY FAMILY 10,000 PESOS twice for each December 11 booking, i.e. for 3 passengers.

CONTACT THE MANILA PHONE NUMBER, MR. STODA

After getting no help from the Taipei contact addresses for Cebu Pacific, we went to the airport. All the Cebu Pacific staff at the International Airport in Taiwan could do was to tell me to contact Cebu Pacific when I arrived to Manila.

Yesterday, I arrived in Manila with my wife and child.

NOW--TODAY--when I CONTACTED face-to-face CEBU OFFICIALS in Manila, they claimed that the company would REFUSE to refund my second or DOUBLE BOOKING of 3 passengers on December 11, 2010 from Taipei to Manila--stating the company "considered it solely the responsibility of the passengers involved when there is any online booking error."

CLARK FREEPORT, Philippines—A team of 50 Filipino mechanics and engineers has started building seaplanes inside this freeport.

The amphibious aircraft is called “S-Ray 007,” said Iren Dornier, who designed the latest project of the South East Asian Airlines (Seair), the airline he chairs and co-founded with Nickos Gitsis in 1995.

“That’s a little bit of a James Bond,” he said, when asked on the famous three numbers. It is actually derived from 2007, the year Dornier first flew and landed the S-Ray prototype somewhere in the Philippines. The first five units were produced in Europe.

The Philippines, he said, is the “right environment for such an airplane,” he said, noting that the country, although with 7,100 islands, has no seaplanes at all.

He said the S-Ray 007 was designed for government, civilian, border patrol, search-and-rescue missions.

This aircraft is a “modern and bigger version” of Libelle, a flying boat that his grandfather, Claude Dornier, flew in 1921, Dornier said.

The basic version of S-Ray 007 costs $300,000. The Clark manufacturing facility targets to make 300 units. The seaplane, which weighs 825 kilograms, can carry two persons. Its wing span is 9 meters.

Among the features include a hydraulic-driven tricycle landing gear that “can be lowered inside the water to move up or down a ramp.”

“I got a few orders. The acceptance is quite high,” Dornier told the Inquirer.

To set up the manufacturing plant here, Dornier first sent to Germany at least 10 Filipinos who worked with the Clark-based Seair in the last 15 years.

In 2004, Dornier held a World Tour using the same Dornier-24 that his grandfather flew in 1944 and which had saved over 11,000 people during World War II.

The eight-month tour, done through the support of the United Nations Children’s Fund (Unicef), aimed to motivate the youth to follow their dreams. It raised $61,000 for Filipino children.

Dornier’s grandfather had built several flying boats such as the Rs I in 1915, Wal in 1922, Do X in 1929, Do.24 V/K in 1938, Do 26 in 1938 and Do 18 E in 1935. The elder Dornier also built the light fighter bomber and trainer Alpha Jet in 1973.

THE CIVIL Aeronautics Board (CAB) has allowed a partnership between South East Asian Airlines (SEAIR) and Singapore-based Tiger Airways to proceed despite complaints from four local carriers.

CAB Executive Director Carmelo L. Arcilla said the carriers’ request to issue a cease-and-desist-order against SEAIR-Tiger Airways flights to Singapore from the Clark airport over legal questions was not granted.

“The matter is undergoing due process already and it will be set for a hearing,” Mr. Arcilla told yesterday.

Mr. Arcilla said that after four local carriers, namely Philippine Airlines (PAL), Cebu Pacific, Air Philippines, and Zest Air, filed a consolidated opposition to the SEAIR-Tiger Airways deal last month, SEAIR was asked to comment. The four carriers are claiming SEAIR is allowing a takeover of a foreign airline in the guise of a marketing and leasing deals.

“The first step was to furnish the respondent a copy of the complaint and ask them to comment on the allegations, and now that SEAIR has responded, it will be set for hearing,” Mr. Arcilla said.

Mr. Arcilla said a hearing will “probably be scheduled next week,” as this will be the next step in the process.

In a letter dated Dec. 9, PAL wrote on behalf of the other carriers to CAB Chairman Glicerio V. Sicat, reiterating their opposition to the partnership first raised in a letter to the board last Nov. 26.

“We believe that we are raising compelling questions on whether the SEAIR/Tiger service may not actually be a Philippine carrier operation, but instead the first salvo of a foreign (Singaporean) air carrier operating a Philippine-based international route network in the guise of a Philippine air carrier, and making use of Philippine carrier international traffic rights privileges,” Ma. Socorro R. Gonzaga, PAL senior assistant vice-president for external affairs, said in the letter.

“Indeed, the operation may be expanded to include domestic routes as well, raising likewise the question of effectively granting regular cabotage access to a foreign airline for the first time in [Philippine] history,” Ms. Gonzaga added.

The four carriers are pointing to CAB Resolution No. 51, which prohibits Tiger Airways from directly earning money from the partnership with SEAIR.

SEAIR and Tiger Airways announced the partnership in a joint statement last Nov. 23. Under the deal, two Airbus aircraft will be leased to SEAIR, and SEAIR seats will be distributed through Tiger Airways’ Internet booking system.

The first SEAIR-Tiger Airways flight from Clark to Singapore last Dec. 16 pushed through.

In a phone interview, SEAIR President Avelino L. Zapanta, said the complaints of the four local carriers were only a “rehash” of what they had filed in 2007, when SEAIR and Tiger Airways first sought to seal a partnership. The deal did not push through amid a global economic slowdown.

“In 2008, the case was dismissed in favor of SEAIR,” Mr. Zapanta said. “These are the same speculations and allegations three years ago and they have not come up with any new evidence,” he said.

PAL spokeswoman Cielo C. Villaluna said: “There is simply a concern regarding overcapacity and a possible price war among airlines. But PAL, as an airline, welcomes competition.” -- Businessworld

The arrangement between the two airlines, wherein SEAir flights—using aircraft leased from Tiger Airways—will be sold on the latter’s website, allegedly skirts a constitutional restriction on the foreign ownership of companies in vital industries.

In a letter to the Department of Transportation and Communications (DOTC), copy furnished the Civil Aeronautics Board (CAB), Philippine Airlines (PAL), Cebu Pacific, Zest Airways and Air Philippines called for an investigation of the operations of SEAir and Tiger.

“We earnestly request that the board launch a full and exhaustive investigation into the matter for the purpose of ascertaining, among others, that the marketing agreement entered into between SEAir and Tiger is in strict compliance with the terms of the CAB,” said the joint letter obtained from the CAB.

In its own letter to DOTC Undersecretary for Civil Aviation Glicerio Sicat, PAL said, “It is becoming apparent that Tiger has a direct stake and participation in the success of the new venture.”

“It is noted that all four Philippine international air carriers took the unprecedented step of filing said consolidated opposition, in which we jointly requested the [CAB] to issue a cease-and-desist order directing SEAir and Tiger to stop selling and promoting the planned Clark-Singapore flights,” the letter dated December 9 said.

The Constitution prohibits foreigners from owning more than a 40-percent stake in companies in industries such as transportation and telecommunications.

The four airlines in their letter asked the regulator to investigate “the matter to determine if the SEAir and Tiger activities and operations fully comply with Philippine laws, rules and regulations.”

The airlines added that Tiger Airways’ plans to put up an operating base in Clark Freeport in Pampanga, through SEAir, would disregard and undermine Philippine laws, to be achieved through a form of “regulatory sleight of hand.”

NEW ENTRANT: RHB Research notes that AirAsia will be entering the LCC sector in the Philippines as a new entrant, trying to garner a slice of action of the market that was currently dominated by market leader Cebu Pacific.

KUCHING - Airline industry player AirAsia Bhd’s (AirAsia) penetration into Philippines market through joint venture (JV) forming with three Filipino businessmen was seen as a smart move by several research firms.According to OSK Research Sdn Bhd (OSK Research), the JV named AirAsia Incorporation (AAI) was expected to commence operations sometime in September 2011, with 40 per cent stake in the JV, would commence with the deployment of at least two aircraft leased from its parent company, AirAsia.

The research house stated that the Philippines would be an attractive market for low cost carriers (LCCs) such as AAI, given the archipelagic nature of its geography, which would provide conducive conditions for air travel.

Coupled with its high number of Filipinos working abroad to boost demand for international travel, the Philippines would also be offering a significant growth potential on expectations of the high propensity for air travel on the back of rising per capita income, said the research firm.

Despite the intensity of competition in the Philippines’ aviation space,OSK Research noted a lot of room for market share gain, notably in the international segment as AAI would be able to leverage on AirAsia’s superior branding and comprehensive network.

OSK Research viewed that AAI’s earnings could start trickling in after two years of operations.

Another research house, RHB Research Institute Sdn Bhd (RHB Research) noted that AirAsia would be entering the LCC sector in the Philippines as a new entrant, trying to garner a slice of action of the market that was currently dominated by market leader Cebu Pacific.

However, AirAsia would see significant competition from Malaysia Airline System Bhd’s (MAS) recent expansion of its 100 per cent-owned Firefly into a full-fledged LCC, backed by a fleet of 30 fuel-efficient 189-seater Next Generation 737-800 aircraft by 2015 that would lead Firefly to compete head-on with AirAsia’s A320 fleet.

It highlighted that Firefly, a new entrant to the jet segment would go all out to capture market share at the expense of profitability by heavy price discounting while AirAsia might also want nip the competition in the bud by dropping fares. Borneopost

Don’t greet airline executives a Happy New Year. They are even now wishing they could put the next year on fast forward and get it over with. Fuel prices are again on an upswing and there are some analysts who are talking $100 a barrel oil. And even as mergers and alliances are starting to have some positive impact on the bottom line, the threat of a double dip recession could nip rising passenger numbers all too soon.

Domestically, two more things are major concerns. It is certain that 2011 will bring about open skies and increased competition. Despite the usual noise against it from the usual suspects, I don’t think open skies or the “pocket” open skies version can be stopped. I understand the Aquino administration strongly believes in it and is committed to implement it as soon as it can next year.

I am not going into the pros and cons of open skies because this is one topic that had been discussed widely and for some years now. From a business perspective, the local airlines should spend more effort now planning to live with it rather than trying to stop it. The rules of the game are changing and it is take it or leave it.

Stiff competition is the other major headache in the local airline industry. The smaller airlines are beefing up their fleet and teaming up with larger foreign airlines to give the predominant players, PAL and Cebu Pacific a run for market share.

As earlier reported in this column, SEAir is leasing Airbus 320s from Singapore’s Tiger Airways and will thus be in a better position of mounting flights to key domestic destinations too. Tonyboy Cojuangco is teaming up with Air Asia’s Tony Fernandes on a new airline with a 60/40 ownership structure that will also enable it to compete in the domestic market. Zest Air is also beefing up its fleet.

We are now seeing a stiff competition among the airlines not just for passengers but for the services of trained and certified pilots. The flight operations of some of the airlines, including the established ones, may be disrupted next year as pilots are continually being poached by local and foreign competitors.

This early, the President of Philippine Airlines is warning that the domestic market may not be that big and ruinous competition may result. That is probably true. It also complicates an already difficult market for the country’s premier flag carrier.

As I had explained here in some past columns, the big problem of PAL is that it is overstaffed and cannot be as nimble as the budget carriers like Cebu Pacific. PAL has some 7000 employees compared with Cebu Pacific’s 2,500 and at least in the domestic and comparable international regional routes, Cebu Pacific had been flying more passengers already.

This is why even the Department of Labor saw the importance of allowing PAL management to do what it should to improve the competitiveness of the airline. There is no choice for PAL but to try to approximate the efficiency of Cebu Pacific and the host of new and existing budget airlines in order to survive.

The order from Malacañang for both management and labor union to hold their horses will only delay the inevitable. There is no way they can escape addressing the need to make PAL’s structure and business model more in tune with competitive requirements in today’s airline market.The officers of the employee labor union are doing their members a great disservice by refusing to see the futility of the status quo. The employees union should learn from the example of the American automotive unions. When it became clear that GM, Ford and Chrysler would go belly up unless the unions worked with management and government to save the car companies, the United Auto Workers or UAW decided that cooperation was the better deal.

It was a painful decision for the tough American automotive union who had to give up years of hard won benefits. But the union leaders realized that if they want to truly protect the economic interest of the workers, they will have to save their respective car companies first. It is the same thing with PAL. It is crunch time and every stakeholder must decide if they want to save the airline or bury it for good.

For the Lucio Tan haters, what Lucio Tan is or is not is irrelevant. The key problem now is how to make the airline competitive. The alternative is to let the airline die and allow the new airlines to take its market share. There is something Darwinian in the capitalist system. Weak corporations should be allowed to die.

If PAL dies because it was not allowed by its staff to reorganize to meet competition, the surviving airlines will take over PAL’s market share, routes and even its planes and other assets at no cost to the taxpayers. PAL should not be considered too big to fail.

Even if it wants to, it would be extremely difficult for the government to bail out PAL now. Government has a serious fiscal deficit problem. It is also not good policy to use the money of 90 million taxpayers to save 2,500 jobs, jobs which aren’t going to be there in the long term anyway.

What happens next in PAL is also going to be an important test for the Aquino administration. Will it just do the politically expedient alternative and capitulate? Will it exercise leadership and allow the airline to reconfigure its business model to help it survive today’s new business environment?

PAL employees should learn an important lesson from the pilots who went on strike some years ago. It turned out that the pilots’ union was ill-advised and the pilots lost everything after their strike had been held illegal by the courts.

But pilots have one great thing in their favor that the ordinary airline employees don’t have. Pilots have world class skills that are in high demand in the world market. In fact, retaining and hiring enough pilots will be a major headache for the local airlines next year. What money the airlines have will be used to keep and hire the pilots first.A PAL strike during the holidays will be a disaster for the airline… but a life changing calamity for the affected employees and their families. It would be better for them to take the million pesos or so offered and then take their chances on a new career. The union leaders are taking on the responsibility for the lives of their members and their families. For their own sakes, I hope everyone will be reasonable.

Eyes Clark hub

December 17, 2010

SOUTHEAST Asia’s budget carrier king Tony Fernandes yesterday launched a joint venture airline with Philippine businessmen, giving a jolt of competition to what he described as an underserved aviation market.

AirAsia Group Chief Executive Officer Tony Fernandes (left) shakes hands with Antonio “Tonyboy” Cojuangco, Jr., a cousin of President Benigno S. C. Aquino III, during a news conference in Makati. Southeast Asian budget carrier king Mr. Fernandes yesterday launched a joint venture airline in the Philippines, giving what he described as an underserved market a big jolt of competition. -- AFP

AirAsia Philippines, Inc. in which AirAsia will hold a 40% stake, should begin flight operations in August next year using either Clark or Subic -- two former United States military bases near Manila -- as its base, the Malaysian said.

The partners have approved an authorized capital expenditure of $25 million for the joint venture.

“The amount does not include the cost of putting the terminal. We still have to compute that. Our aircraft will be leased from AirAsia Malaysia. We will have three to five 150-seater Airbus 320s to be used in the next few months,” he said.

Mr. Fernandes said internal funds would capitalize the joint venture, in which investors led by Antonio “Tonyboy” O. Cojuangco, a cousin of President Benigno S. C. Aquino III, hold a combined 60%, the minimum local equity stake set by the Constitution.

“Many of the routes that AirAsia Philippines will be going to are already being exploited by other AirAsia companies, so the setup cost for AirAsia Philippines is very low,” enabling low fares, Mr. Fernandes said.

Local competition includes successful budget carrier Cebu Pacific, which recently went public, and the loss-making flag carrier Philippine Airlines (PAL).

“Cebu Pacific has done a fantastic job,” Mr. Fernandes said, praising its equally low-cost, no-frills model but saying there was more than enough room for the AirAsia group to grow.

“I think PAL could have, I’m sure, done a better job,” he added.

Kuala Lumpur-based AirAsia has set up similar joint ventures in Thailand and Indonesia and previously announced plans to set up a unit in Vietnam.

However, Mr. Fernandes said AirAsia was now giving priority to the Philippine joint venture before proceeding with the Vietnam project.The flashy 46-year-old tycoon, who also heads the Lotus Formula One team, said that just a tiny segment of the Philippine population of 95 million people were currently making use of air travel, giving the project huge potential.

Marianne Hontiveros, a music industry executive, will be the AirAsia Philippines chief executive, with Mr. Cojuangco as chairman.

“We need tourism badly in our country, and we have so much to offer,” Ms. Hontiveros told the press conference yesterday.

Transportation ministry Undersecretary Glicerio Sicat welcomed the airline investment as a boost to a tourism sector that is seriously falling behind its Southeast Asian neighbors due to bad infrastructure and security problems.

“As Tony Fernandes himself said, more people would be able to fly,” Mr. Sicat told reporters.

He said the government expects AirAsia to serve certain areas not adequately served by local carriers.

“He (Mr. Fernandes) said some of their routes would be pioneering.

We will improve the airport facilities, that will be our contribution,” Mr. Sicat told reporters.

The Aquino government has singled out tourism as a potential key growth driver, and had warned PAL, which is facing labor problems, to shape up or face tougher competition under an “open skies” regime that will let more foreign airlines in.

The Philippines tourism ministry hopes to double annual tourist arrivals to six million, raising annual tourism revenues to at least $4.6 billion and creating three million new jobs.

Michael L. Romero of the local port operator Harbour Centre will be the vice-chairman of AirAsia Philippines.

“AirAsia Group has been interested in putting up a hub in the Philippines for the past three years. It was only last year that we finally decided to have this joint venture,” Mr. Romero said.

“We believe in the reputation of the budget carrier as it was able to have 25 million passengers today from 100,000 passengers when it started. Carriers around the world are going to the low-cost model as it is more attractive to the passengers,” he added.

Victor Jose I. Luciano, president and chief executive officer of Clark International Airport Corp., told reporters in the same briefing the airport in Clark, Pampanga is “always ready to accommodate AirAsia Philippines.”

“We are just waiting for them to decide whether they will have their hub in Clark. But we will respect their decision if they opt to have it in Subic,” he said.

Mr. Fernandes said the company was “still weighing options” whether to choose Clark or Subic as the hub for operations.

“We will have the decision within the month. Hopefully, we can have our maiden flight by March or April next year,” he said.

Last month, AirAsia said net profit for the September quarter rose to 327.29 million ringgit ($62.89 million) from 130.07 million ringgit in the same period last year. -- AFP andAura Marie P. Dagcutan. Businessworld.

The turmoil in Philippine Airlines aside, it really is time to ramp up the implementation of the so-called “open skies” policy for air transportation. It has been over 15 years since the landmark Executive Order 219, issued by President Fidel Ramos in January 1995, called for the liberalization of the air travel industry in the Philippines.

As far as domestic travel is concerned, liberalization was an unqualified success. The most obvious proof is the rise of Cebu Pacific, which now has fair claim to being the country’s leading airline. When it comes to the international sector, however, the record has not been very encouraging.

President Benigno Aquino III, following through on a long-held commitment, has said he wants to implement EO 219 fully. At the private-public partnerships “summit” last month, he vowed to take the necessary next steps to implement the EO’s provisions on international aviation. “Our national development requires promoting an open and competitive international aviation sector that enables Philippine and foreign air carriers to expand their operations, maintain a strong Philippine-based aviation industry, and ensure international connectivity in order to allow Philippine and foreign air carriers to plan and make long-term investments in the Philippine market.”

Open skies will have its biggest impact on Philippine tourism; it is seen as one crucial stage in the development of a world-beating tourism industry. Even the Aquino administration, however, despite its high approval ratings, will face great resistance in implementing the policy. It will be up against three persistent, pernicious myths.

It is obvious that the open skies policy, even in the “pocket” version that the Aquino administration wants to try first, cannot work by itself. No advocate has ever said that it is the silver bullet that will slay the vampire of lower-than-deserved tourist arrivals. However, quite a number of critics of open skies argue as though the policy were a stand-alone initiative. This, then, is the first myth: open skies will be characterized as putting the cart before the horse. But in fact efforts are under way to decongest airport terminals, build new roads, create more support systems, train more tourist workers and (as we have seen in the botched Pilipinas Kay Ganda campaign) create a new, more attractive marketing drive.

The second myth is present market demand. It is an argument offered by Philippine Airlines management, and has been echoed by an official of the Civil Aeronautics Board. Foreign airlines have seat entitlements they do not use, said Porvenir Porciuncula, CAB deputy executive director. “It is really a function of the market. Open skies will not guarantee foreign airline flights to the country,” he said. This is the kind of thinking that, under its old management, allowed PLDT to monopolize the telephone industry for many years. It is a bureaucrat’s view, not an entrepreneur’s perspective—and would have been incapable of imagining the growth in the number of phones in the country after deregulation.

Opponents of open skies are insisting on reciprocity, wrapping this particular argument with the mantle of nationalism. Of course reciprocity is fundamental to any open-skies agreements but, we hasten to add, reciprocity must be understood in a broader sense, the better to serve the public interest. This, then, is the third myth: The idea that open skies must mean strict equality, seat for seat, route for route, airport for airport. But, just to give one example, wouldn’t we want more tourists from Singapore? How many points of entry can that tiny but rich island-state offer us? EO 219 defined the criteria for the exchange of travel rights and routes right: It should be a combination of reciprocity, defined as “the exchange of rights, freedoms, and opportunities of equal or equivalent value,” and the national interest, including “value for the Philippines in promoting international trade, foreign investments and tourism.”

We should not leave the definition of national interest to airlines or bureaucrats alone.

Panlilio said he was told of the plan by Air Asia chief executive Tony Fernandes at the sidelines of the Association of Southeast Asian Nations’ finance ministers’ meeting in Kuala Lumpur last week.

The planned Philippine subsidiary should start commercial operations next year, Panlilio said without adding details.

Cojuangco was chairman and chief executive of Philippine Airlines during the early Cory Aquino years after his group won the bidding for the privatization of the flag carrier.

Air Asia began offering regional flights to and from the Philippines out of Clark in April 2005.

Fernandes told Bloomberg last week that Air Asia, Asia’s largest budget airline with 100 planes in its fleet, planned to acquire as many as 12 planes a year and was seeking opportunities in the Philippines, Vietnam, China and India.

AN ongoing row between the airlines and Customs staff at the airport took a turn for the worse over the weekend after international airline operators said they will stop providing Customs declaration forms to arriving passengers next year.

The Airline Operating Council told the Bureau of Customs on Dec. 2 that it will stop printing and distributing the Customs arrival cards starting Jan. 1 and turn that responsibility over to the bureau.

For the last 10 years, the council has shouldered the expense of printing and distributing the cards with help from Smart Communications as a sponsor. But Smart had terminated its sponsorship, and as a result the council would follow suit, group chairman Maria Lourdes San Juan Reyes.

The arrival forms are the latest wrinkle in the deteriorating relations between the airlines and Customs staff, who have been threatening to stop working after regular hours because of their unpaid overtime.

For decades, the airlines had been paying airport staff overtime and allowances, but they recently stopped because it was the government’s job to pay its employees.

A Court of Appeals decision found for the airlines, but in response some Customs employees started refusing to process arriving passengers after midnight, forcing them to wait for almost an hour inside the plane.

Some Customs booths are often undermanned, forcing arriving passengers to form a long line waiting to be cleared. Airline operators say the intent is to make travelers hate the airlines.

Earlier, Tourism Secretary Alberto Lim called on the Finance Department and the Bureau of Customs to resolve the problem to prevent another international embarrassment for the country.

The country uses about 22 million Customs declaration forms a year, with Philippine Airlines being the biggest user of about 5 million followed by Cebu Pacific with 3 million.

The balance is taken up by the 30-member Airline Operating Council. The group says each arrival card costs about a peso, and that Smart used to defray most of it.

The Aquino government faced its first rebuke in its proposal to open more of its Philippine airspace after the Civil Aviation Board (CAB) informed the House of Representatives’ transportation committee that foreign carriers already enjoy adequate access to Philippine skies but no foreign carriers are operating on them.

Liberalized Skies

CAB deputy Executive Director Porvenir Porciuncula told the House that civil aeronautics in the country is already under a liberalized status because global leaders in commercial aviation have free access to the country.

“Our air agreements already allow flights to most of the points outside Manila. The big markets, Japan, US, China, South Korea, they can operate in Cebu, Davao but what they are looking for is profitability,” said Porciuncula.

The CAB official stressed that the open skies policy should not be taken as a “cure all” to the government’s need to lure more travelers, particularly tourists, to the country.

Philippine Airlines (PAL) also debunk claims that there is lack of airline seats to accommodate tourists as the open skies advocates insists that the lack of airline seats is the principal reason for low tourist arrivals in the country prompting the government.

47 Million seats

In a statement, PAL said that “It’s not the number of airline seats that is the behind the lack of tourist interest in the Philippines but the country’s negative image abroad, specially in the area of peace and order and security,” this according to Ma. Socorro Gonzaga, PAL senior assistant vice-president for external affairs.

“It’s not the number of airline seats that is behind the lack of tourist. Its about the image of the Philippines” Ms. Gonzaga said, saying that there are 47.4 million seats available to foreign and local carriers at present.

“However, of these 47.4 million available seats, only 10.97 million seats -- or 23% of total entitlements -- were used by foreign and local carriers last year. ”

Of the 10.97 million passengers that came to the country by air in 2009, only 2.9 million were foreign tourists,” she said.

25 million seats for Clark

Clark airport already enjoys 25.6 million in seat entitlements yearly but manage to attract only less than 200,000 foreign tourists out of the more than 600,000 that uses the airport for international destinations. Cebu got 20.7 million seats but registers only less than a million foreign tourists; while Davao has 20.3 million and manage to fly only less than 100,000.

Of the more successful international gateways are Kalibo and Laoag at 19.6 million but with greater foreign arrival ratios than major international airports outside Manila.

In Manila, there are 21.2 million seat entitlements available yearly, and almost all of them are taken, which only mean that passengers wanted to get out of the country at the NAIA airport complex.

Tagbilaran and Puerto Princesa also have 19.6 million seats on offer but none has availed a single seat.

According to the PAL reprsentative, “The sum is more than 47.4 million seats because many of the entitlements may be used for different airports, hence the overlap,” she said.

No Foreign Airlines

Meanwhile, CAAP representative Atty. Joseph Ray Gumabon told the House committee on transportation chaired by Leyte Rep. Roger Mercado that foreign airlines are free to include the country in their routes but they do not fly into the Philippines because there are not enough passengers along the open routes particularly to Cebu and Davao.

Last month, the government said it would further liberalize the civil aviation industry to increase tourist arrivals.

Reps. Ben Evardone (Lakas-Kampi, Eastern Samar), Rene Relampagos (LP, Bohol) and Magtanggol Gunigundo (Lakas-Kampi, Valenzuela) admitted in Wednesday’s public hearing they are not totally convinced an open skies policy is what the country needs to invigorate the tourism industry.

Both however agreed to give their principal authors, Reps. Rex Gatchalian (NPC, Valenzuela City) and Aurora Cerilles (NPC, Zamboanga del Sur), the opportunity to defend their proposals in the next hearing.

Starting Thursday, Director General Alfonso Cusi of the Civil Aviation Authority of the Philippines (Caap) will assume chairmanship of a branch of the International Civil Aviation Organization (Icao).

Cusi will assume the top post in Icao’s Cooperative Development of Operational Safety and Continuing Airworthiness Programs (Coscap) branch, one of the international body’s three branches in the Asia-Pacific Region.

Cusi is the first Filipino to head the organization and would be at the helm for one year, Capt. Len J. Cormier, Caap chief technical adviser.

The position is rotated among member states every year.

Cormier said that that according to the Icao Universal Safety Oversight Audit Program (Usoap), many Asia-Pacific countries find it difficult to adequately meet their safety oversight obligations. One example is the lack of check pilots, cabin crews and flight operations inspectors.

Coscap staff are often asked to provide guidance on the interpretation of regulations-standards, best practices, or technical matters. Considerable assistance has been provided to support member administrations preparations and response to Icao-Usoap audits.

Cusi hopes under him, Coscap would become the perfect vehicle for the country and other member states to be able to address their specific problems, thus leading to their attainment of international safety standards.

Specifically, for the Philippines, Cusi said he hopes that this would be the opportunity to speed up the process of meeting the significant safety concerns (SSC) so that the country may get back to Category 1 status very soon.

With Coscap, Icao would be able to support, establish and improve safety among groups of participating states.

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